CARY, N.C.--(BUSINESS WIRE)--The Pantry, Inc. (NASDAQ: PTRY), the leading independently-operated convenience store chain in the southeastern U.S., today announced financial results for its fiscal first quarter ended December 30, 2010.
First Quarter Summary:
- Net loss was $12.2 million or $0.54 per diluted share. This compares to a net loss of $26.1 million or $1.17 per diluted share in last year’s first quarter. Excluding the impact of impairment and other charges the net loss for the first quarter of fiscal 2010 was $5.8 million or $0.26 per share.
- Adjusted EBITDA was $31.3 million, compared to $40.3 million a year ago
- Comparable store merchandise revenue increased 1.3%
- Merchandise gross margin improved to 33.5% from 32.6% in last year’s first quarter
- Fuel gross profit was $50.7 million, compared to $57.0 million a year ago
- Completed the 47-store Presto acquisition, using $47.6 million in cash.
President and Chief Executive Officer Terrance M. Marks said, “Adjusted EBITDA was below our expectations for the quarter, driven by soft merchandise comparable store sales growth and low fuel margins. Merchandise sales performance was particularly weak in the latter half of December, which we believe was primarily driven by the severe winter weather that affected the Southeast. On a positive note, the sales performance in our Fresh stores continues to exceed expectations. We completed the Charlotte store conversion process on schedule in December and are moving quickly to our next markets.”
Comparable store merchandise sales in the first quarter increased 1.3% and 1.7% excluding cigarettes. Total merchandise gross profit for the quarter was $140.5 million, an increase of 3.1% from the first quarter a year ago.
Comparable store retail gallons sold in the first quarter decreased 5.2%. Retail fuel revenues in the first quarter increased 4.8% to $1.4 billion primarily as a result of the 12% increase in the average retail price per gallon to $2.81 from $2.52. Fuel gross profit for the first quarter decreased 10.9% compared to the same period a year ago, due to a decrease in retail fuel margin per gallon to $0.104 compared to $0.109 and the decrease in retail fuel gallons sold.
Total store operating and general and administrative expenses for the first quarter increased 4.6% to $160.0 million from the first quarter last year primarily as a result of strategic investments in advertising and category management capability to support the Program Fresh initiative and professional costs associated with the Presto acquisition.
The Company remains comfortable with its liquidity position given the $132 million in cash on hand and approximately $106 million in available capacity under its revolving credit facilities as of December 30, 2010.
Fiscal 2011 Outlook
The Company updated the following guidance ranges for its expected performance (excluding potential acquisitions) in fiscal 2011, which is a 52-week fiscal year:
| Year Ending September 29, 2011 | |||||||||
| Low | High | ||||||||
| Merchandise sales (billions) | $ | 1.80 | $ | 1.84 | |||||
| Merchandise gross margin | 33.9 | % | 34.5 | % | |||||
| Retail fuel gross profit (millions) | $ | 236 | $ | 267 | |||||
| Retail fuel gallons (billions) | 1.98 | 2.05 | |||||||
| Retail fuel margin per gallon | $ | 0.115 | $ | 0.135 | |||||
| Total OSG&A (millions) | $ | 640 | $ | 650 | |||||
| Depreciation & amortization (millions) | $ | 117 | $ | 122 | |||||
| Interest expense (millions) | $ | 82 | $ | 85 | |||||
| Capital expenditures (millions) | $ | 105 | $ | 115 | |||||
Conference Call
Interested parties are invited to listen to the first quarter earnings conference call scheduled for Tuesday, February 8, 2011 at 8:30 a.m. Eastern Time. The call will be broadcast live over the Internet and will be accessible through either the Investors section of the Company's website at www.thepantry.com or www.companyboardroom.com. An online archive will be available immediately following the call and will be accessible for 30 days.
Use of Non-GAAP Measures
Adjusted EBITDA
Adjusted EBITDA is defined by the Company as net income before interest expense, net, gain/loss on extinguishment of debt, income taxes, impairment charges and depreciation and amortization. Adjusted EBITDA is not a measure of operating performance or liquidity under accounting principles generally accepted in the United States of America (“GAAP”) and should not be considered as a substitute for net income, cash flows from operating activities or other income or cash flow statement data. The Company has included information concerning Adjusted EBITDA because it believes investors find this information useful as a reflection of the resources available for strategic opportunities including, among others, to invest in the Company’s business, make strategic acquisitions and to service debt. Management also uses Adjusted EBITDA to review the performance of the Company's business directly resulting from its retail operations and for budgeting and field operations compensation targets.
Net Income/(Loss) and Net Income/(Loss) Per Share Excluding Certain Items
In addition to net income/(loss) and net income/(loss) per share presented in accordance with GAAP, the Company has also presented net income/(loss) and net income/(loss) per share for the three months ended December 24, 2009 excluding the after-tax impact of non-cash charges related to impairment and excess depreciation related to remodeling activity. Management believes that investors find this information useful as a reflection of the Company’s underlying operating performance and that this information facilitates comparisons between the Company and other companies in its industry. Management uses these measures as part of its preparation of operating plans, budgets and forecasts and in its assessment of the Company’s historical performance.
Additional Information Regarding Non-GAAP Measures
Any measure that excludes interest expense, gain/loss on extinguishment of debt, depreciation and amortization, or impairment charges has material limitations because the Company uses debt and lease financing in order to finance its operations and acquisitions, uses capital and intangible assets in its business, and must pay income taxes as a necessary element of its operations. Due to these limitations, the Company uses non-GAAP measures in addition to and in conjunction with results and cash flows presented in accordance with GAAP. The Company strongly encourages investors to review its consolidated financial statements and publicly filed reports in their entirety and not to rely on any single financial measure.
Because non-GAAP financial measures are not standardized, the measures referenced above, each as defined by the Company, may not be comparable to similarly titled measures reported by other companies. It therefore may not be possible to compare the Company's use of these measures with non-GAAP financial measures having the same or similar names used by other companies.
About The Pantry
Headquartered in Cary, North Carolina, The Pantry, Inc. is the leading independently operated convenience store chain in the southeastern United States and one of the largest independently operated convenience store chains in the country. As of February 7, 2011, the Company operated 1,662 stores in thirteen states under select banners, including Kangaroo Express(R), its primary operating banner. The Pantry's stores offer a broad selection of merchandise, as well as fuel and other ancillary services designed to appeal to the convenience needs of its customers.
Safe Harbor Statement
Statements made by the Company in this press release relating to future plans, events, or financial performance are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on the Company's current plans and expectations and involve a number of risks and uncertainties that could cause actual results and events to vary materially from the results and events anticipated or implied by such forward-looking statements. Any number of factors could affect actual results and events, including, without limitation: the ability of the Company to take advantage of expected synergies in connection with acquisitions; the actual operating results of stores acquired; the Company's ability to enhance its operating performance through its in-store initiatives; the ability of the Company to identify, acquire and integrate acquisitions into its operations; fluctuations in domestic and global petroleum and fuel markets; realizing expected benefits from the Company's fuel supply agreements; changes in the competitive landscape of the convenience store industry, including fuel stations and other non-traditional retailers located in the Company's markets; the effect of national and regional economic conditions on the convenience store industry and the Company's markets; the global financial crisis and uncertainty in global economic conditions; wholesale cost increases of, and tax increases on, tobacco products; the effect of regional weather conditions and climate change on customer traffic and spending; legal, technological, political and scientific developments regarding climate change; financial difficulties of suppliers, including the Company's principal suppliers of fuel and merchandise, and their ability to continue to supply its stores; the Company's financial leverage and debt covenants; environmental risks associated with selling petroleum products; and governmental laws and regulations, including those relating to the environment. These and other risk factors are discussed in the Company's Annual Report on Form 10-K and in its other filings with the Securities and Exchange Commission. In addition, the forward-looking statements included in this press release are based on the Company's estimates and plans as of February 7, 2011. While the Company may elect to update these forward-looking statements at some point in the future, it specifically disclaims any obligation to do so.
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The Pantry, Inc. |
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| Unaudited Consolidated Statements of Operations and Selected Financial Data | |||||||
| (In thousands, except per share and per gallon amounts, margin data and store count) | |||||||
| Quarter Ended | |||||||
|
December 30,
2010 |
December 24,
2009 |
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| (13 weeks) | (13 weeks) | ||||||
| Revenues: | |||||||
| Merchandise | $ | 419,865 | $ | 417,572 | |||
| Fuel | 1,383,941 | 1,318,826 | |||||
| Total revenues | 1,803,806 | 1,736,398 | |||||
| Costs and operating expenses: | |||||||
| Merchandise cost of goods sold | 279,316 | 281,284 | |||||
| Fuel cost of goods sold | 1,333,192 | 1,261,838 | |||||
| Store operating | 131,884 | 130,849 | |||||
| General and administrative | 28,131 | 22,104 | |||||
| Impairment charges | --- | 32,637 | |||||
| Depreciation and amortization | 28,831 | 28,969 | |||||
| Total costs and operating expenses | 1,801,354 | 1,757,681 | |||||
| Income (loss) from operations | 2,452 | (21,283) | |||||
| Interest expense, net | |||||||
| Interest on lease finance obligations | 10,477 | 10,597 | |||||
| Interest expense – all other, net | 10,479 | 11,158 | |||||
| Total interest expense, net | 20,956 | 21,755 | |||||
| Loss before income taxes | (18,504) | (43,038) | |||||
| Income tax benefit | 6,307 | 16,969 | |||||
| Net loss | $ | (12,197) | $ | (26,069) | |||
| Earnings per share: | |||||||
| Net loss per diluted share | $ | (0.54) | $ | (1.17) | |||
| Diluted shares outstanding | 22,404 | 22,279 | |||||
| Selected financial data: | |||||||
| Adjusted EBITDA | $ | 31,283 | $ | 40,323 | |||
| Payments made for lease finance obligations | 11,953 | 11,952 | |||||
| Merchandise gross profit | $ | 140,549 | $ | 136,288 | |||
| Merchandise margin | 33.5% | 32.6% | |||||
| Retail fuel data: | |||||||
| Gallons | 487,141 | 518,144 | |||||
| Margin per gallon (1) | $ | 0.104 | $ | 0.109 | |||
| Retail price per gallon | $ | 2.81 | $ | 2.52 | |||
| Total fuel gross profit | $ | 50,749 | $ | 56,988 | |||
| Comparable store data: | |||||||
| Merchandise sales % | 1.3% | 5.2% | |||||
| Fuel gallons % | -5.2% | 0.8% | |||||
| Number of stores: | |||||||
| End of period | 1,669 | 1,658 | |||||
| Weighted-average store count | 1,644 | 1,668 | |||||
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(1) Fuel margin per gallon represents fuel revenue less cost of product and expenses associated with credit card processing fees and repairs and maintenance on fuel equipment. Fuel margin per gallon as presented may not be comparable to similarly titled measures reported by other companies. |
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The Pantry, Inc. |
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| Unaudited Condensed Consolidated Balance Sheets | |||||||
| (In thousands) | |||||||
| December 30, 2010 | September 30, 2010 | ||||||
| ASSETS | |||||||
| Cash and cash equivalents | $ | 132,253 | $ | 200,637 | |||
| Receivables, net | 107,788 | 92,118 | |||||
| Inventories | 144,973 | 130,949 | |||||
| Other current assets | 42,721 | 33,316 | |||||
| Total current assets | 427,735 | 457,020 | |||||
| Property and equipment, net | 1,024,595 | 1,005,152 | |||||
| Goodwill | 430,361 | 403,193 | |||||
| Other noncurrent assets | 33,624 | 31,085 | |||||
| Total assets | $ | 1,916,315 | $ | 1,896,450 | |||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
| Current maturities of long-term debt | $ | 8,360 | $ | 6,321 | |||
| Current maturities of lease finance obligations | 7,029 | 7,024 | |||||
| Accounts payable | 159,494 | 144,358 | |||||
| Other accrued liabilities | 107,897 | 114,031 | |||||
| Total current liabilities | 282,780 | 271,734 | |||||
| Long-term debt | 752,236 | 753,020 | |||||
| Lease finance obligations | 450,843 | 450,312 | |||||
| Deferred income taxes | 59,404 | 38,388 | |||||
| Deferred vendor rebates | 10,047 | 10,212 | |||||
| Other noncurrent liabilities | 63,512 | 64,675 | |||||
| Total shareholders’ equity | 297,493 | 308,109 | |||||
| Total liabilities and shareholders’ equity | $ | 1,916,315 | $ | 1,896,450 | |||
| The Pantry, Inc. | ||||||
| Reconciliation of Non-GAAP Financial Measures | ||||||
| (In thousands) | ||||||
| Quarter Ended | ||||||
| December 30, 2010 | December 24, 2009 | |||||
| Adjusted EBITDA | $ | 31,283 | $ | 40,323 | ||
| Impairment charges | --- | (32,637) | ||||
| Interest expense, net | (20,956) | (21,755) | ||||
| Depreciation and amortization | (28,831) | (28,969) | ||||
| Income tax benefit | 6,307 | 16,969 | ||||
| Net loss | $ | (12,197) | $ | (26,069) | ||
| Adjusted EBITDA | $ | 31,283 | $ | 40,323 | ||
| Interest expense, net | (20,956) | (21,755) | ||||
| Income tax benefit | 6,307 | 16,969 | ||||
| Stock-based compensation expense | 707 | 873 | ||||
| Changes in operating assets and liabilities | (30,458) | (10,920) | ||||
| Provision (benefit) for deferred income taxes | 12,882 | (6,633) | ||||
| Other | 2,034 | 2,673 | ||||
| Net cash provided by operating activities | $ | 1,799 | $ | 21,530 | ||
| Additions to property and equipment, net | $ | (21,252) | $ | (9,080) | ||
| Acquisitions of businesses, net | (47,564) | 10 | ||||
| Net cash used in investing activities | $ | (68,816) | $ | (9,070) | ||
| Net cash used in financing activities | $ | (1,367) | $ | (2,823) | ||
| Quarter Ended | ||||||||||||
| December 24, 2009 | ||||||||||||
| Pre Tax | After Tax | EPS | ||||||||||
| Loss, as reported | $ | (43,038 | ) | $ | (26,069 | ) | $ | (1.17 | ) | |||
| Impairment charges | 32,637 | 19,954 | 0.90 | |||||||||
| Remodeling charges | 483 | 295 | 0.01 | |||||||||
| Loss, as adjusted | $ | (9,918 | ) | $ | (5,820 | ) | $ | (0.26 | ) | |||